Credit Score Ranges: Is Your Credit Score Good?

Jim TrummNov 29, 2017

Credit score ranges: is your credit score good?

Your credit score affects your life more than your probably realize. Sure, your score is called up when you apply for a credit card, a car loan, or a mortgage. But credit scores are being used more and more to determine whether you can rent an apartment, get a utility hook-up without paying a hefty deposit, get a new job, get a college degree, or even get a date.

It’s unsettling to contemplate the outsize influence your credit score has on areas of your life that have nothing to do with borrowing money. But the fact that your score is calculated by corporations whose subjective credit analysis formulas change frequently and vary from company to company is even more startling.

One way to take back the control that credit scoring companies have over your life is to find out as much as you can about how credit scores work.

What are the credit score ranges?

Creditworthiness is most commonly scored on a scale that runs from a low of 300 to a high of 850. Other ranges, however, are used for specific purposes. For example, a scale of 250 to 900 is used by some credit card companies and automobile loan providers.

On the 300 to 850 scale, credit scores are often placed into four categories.

People whose scores fall between 300 and 629 are deemed to have “bad” credit. They will find it hard to borrow money. And when they do find a lender willing to take a chance on them, they will generally pay high interest rates.

Consumers whose scores fall between 630 to 689 have “fair” or “average” credit. They will likely be able to obtain credit cards and car loans, though their credit limits may be restricted and the interest rates they pay will still be higher than those paid by people with better credit.

Those who have scores between 690 to 719 are considered to have “good” credit. Their financial lives will be easier. Interest rates will be lower, and the number of attractive credit offers they receive will increase along with their credit limits.

The lucky – or prudent – folks with scores above 720 have so-called “excellent” credit. Competition for their business is fierce. Because they are thought to be the safest credit risks, lenders are willing to lower interest rates to near zero in many cases, to offer very attractive credit card benefits, and to speed loan applications through to approval.

What are the different types of credit scores?

Contrary to popular belief, your credit scores are not directly set by the big three credit reporting companies – Equifax, TransUnion, and Experian. Those companies collect the raw data on your financial life. How much credit do you have available to you and how much of that are you using? Are you making your payments on time? Are you thinking of borrowing more money?

That data is then used by a company you’ve probably never heard of – Fair Isaac Corporation, a San Jose data analysis firm. The name of this company has nothing to do with any claim of being fair – it was just the last name of one of its founders. But the company name, abbreviated to FICO, has become synonymous with the credit score numbers that have such a huge impact on your life.

Fair Isaac Corporation analyzes data from Equifax, TransUnion, and Experian. But since those credit reporting agencies may have different information in their databases, the FICO scores that are derived from each agency’s data set may differ. This means that one person can actually have three different FICO scores.

In 2006, Fair Isaac finally got some competition. The big three credit reporting agencies created and jointly own VantageScore Solutions LLC, a credit scoring company that uses different formulas and considers different data to estimate people’s creditworthiness. Although FICO scores are still used as a benchmark by the mortgage industry, VantageScore numbers are increasingly being used by credit card and auto loan companies.

FICO score vs. VantageScore: what’s the difference?

Since Fair Isaac and VantageScore use different algorithms to calculate creditworthiness, it’s not surprising that they can assign different scores to the same person. The average VantageScore is about 25 points lower than the average FICO score, but that doesn’t mean that in every case the VantageScore is lower. In fact, people with poor credit records may find that their VantageScore is higher than their FICO score, while those with good credit records may have slightly lower VantageScores.

What accounts for these differences? VantageScore does not consider paid-off collections, but some versions of FICO do. VantageScores are generated within a month of a person’s first credit application, but to have a FICO score, a person must have had a credit account for at least half a year. VantageScore also considers a person’s rent and utility payment history, while this information is not often included in a FICO score.

Even though FICO and VantageScore use different formulas, the credit scores they generate generally move in lockstep with each other. If your FICO score has increased over the last year, chances a good that your VantageScore has increased as well.

FICO score ranges

Within the 300 to 850 FICO score range, institutions such as banks and credit card companies categorize people’s credit as excellent, good, fair, and bad. An excellent FICO score is generally considered to be 720 and above, whereas a good FICO score is usually between 690 and 719. A fair credit (also known as average credit) score is a number between 630 and 689. Anything below 629 labels you as having bad credit.

VantageScore ranges

Financial institutions reviewing your VantageScores will likely apply the same excellent/good/fair/bad ranges that they apply to FICO scores. It’s important to understand, though, that while credit scores are an important part of your credit profile, they are not the only things that prospective lenders will look at. Lenders will often consider your entire credit report and weight different kinds of negative information differently.

Does checking credit hurt your score?

Checking your own credit reports will not hurt your credit score. In fact, it’s a good idea to check your own credit report at all of the Big Three credit bureaus at least once a year.

However, when potential creditors check your score after you’ve applied for credit, your score may be lowered. This is because credit bureaus believe that seeking more credit means that you're taking more financial risks. The damage to your credit report caused by credit inquiries may last up to two years, though often your score will rebound in a few months. This can be a particularly ironic outcome for people trying to repair their credit rating by cautiously applying for small loans and low credit-line credit cards. If they are denied, their credit rating will be even lower, making it even tougher to reestablish their credit.

The kind of credit inquiries made by prospective lenders that lower your credit rating are called “hard inquiries” or “hard pulls.” Fear of these inquiries has made some people needlessly reluctant to shop around for the best rates on mortgages or car loans. Generally speaking, both FICO scores and VantageScores treat multiple credit inquiries of the same type within a short time as a single event. So if you approach four banks for a car loan within a single week, for example, and all four run a hard pull of your credit, your score should only be lowered by the first one. However, if you apply for one loan, wait a month, and apply for another loan, the resulting credit inquiries will be treated as two hard pulls and your score will be lowered twice.

Soft inquiries are the type of credit reports generally sought by prospective employers, insurance companies, and companies that seek to “pre-qualify” you for a loan or a service. The reason these inquiries don’t affect your score is because the credit bureaus don’t consider them indicators of financial risk.